GrainCorp Limited (GNC) said it would not increase its consideration or the offer period for Ridley Corporation Limited (RIC). The company said it had been adversely impacted by its falling share price and the overall state of the market.
GrainCorp managing director Mark Irwin said the fundamental rationale for the offer remained sound and that the synergies described in the bidder's statement could be achieved.
"The directors of GrainCorp believe our share price is currently undervalued," Mr Irwin said.
"The price does not appropriately reflect the strength of our assets and the improving conditions for the 2008 grain harvest in the areas covered by our storage and logistics network."
In May, GrainCorp launched a bid of one GrainCorp share for every nine Ridley shares.
At the time, the bid was worth $416 million based on a shareprice of around $12 million, however, at yesterday's GrainCrorp closing price of $7.75 the offer was worth around $257 million.
Mr Irwin said GrainCorp's current share price and the external factors impacting on the share market, made the ratio on which the bid was based potentially unattractive to Ridley shareholders."
GrainCorp said the offer would lapse by 26 August 2008 if the 90% minimum acceptance condition was not reached.
"We value Ridley as a customer and we hope to build on the positive working relationships that have developed between key Ridley and GrainCorp operational staff."
Mr Irwin said that while the offer might not be successful, its Storage and Logistics, Hunter Grain and Allied Mills businesses were significant suppliers to Ridley Agriproducts.
"We believe we can grow our services to them, to the mutual benefit of all parties. By working together, both companies can identify and extract new supply chain efficiencies."
"For GrainCorp, the enhancement of shareholder value remains our overriding focus in all activities. GrainCorp now has an opportunity to direct increased attention to specific initiatives related to our infrastructure assets and the pursuit of opportunities related to the removal of the export wheat monopoly."
Last week Ridley directors again recommended shareholders reject the GrainCorp offer after initially dismissing the proposal in May.
At 1453 AEST, GrainCorp was trading up 43c or more than 5% at $8.18, while Ridley was trading down 6c at $1.085.